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Sunday, 18 August 2019

Egypt to choose between E-Finance and BdC for first state company IPO

EXCLUSIVE- Gov’t to choose between e-Finance and BdC for first state company IPO in privatization program: The government is planning to offer shares in either state-owned Banque du Caire (BdC) or financial technology company e-Finance through an initial public offering before the end of the year under the second wave of the state privatization program, sources told us. The choice would depend on the opinion of relevant advisors and the views of cabinet, the sources said. Public Enterprises Minister Hisham Tawfik told us last month that the state’s privatization program had been put on hold until at least September, in order for the stock market to recover from weaker demand during the summer holidays and Eid break.

Call it a gut feeling, but we think BdC looks more likely to go first: When the state is planning to pull the trigger and make a move on either company is still unclear. Both prospects would naturally depend on stock market conditions, and also on the decisions of the IPO advisors and the government committee in charge of the program. Chairman and CEO Tarek Fayed told us in an exclusive interview earlier this year that BdC is “internally ready” for the IPO and is awaiting a decision by stakeholders and regulators.

Contrast that with e-Finance, which is still subject to a two-month valuation study to determine the share price, chairman and managing director İbrahim Sarhan told us. He also pointed out over the weekend that the key factor in his IPO moving forward is to gauge whether the market is ready for another e-payments company to go public after the IPO of privately-owned Fawry, which took place earlier this month.

We know this much about the e-Finance IPO: Pharos’ investment banking arm and Renaissance Capital were tapped to act as joint global coordinators for the sale, Pharos’ Managing Director and Head of Investment Banking Noha Ghazaly told us late last month. Zaki Hashem & Partners, meanwhile, will act as legal advisors, and Baker Tilly will be preparing the fair value report.

The sale could involve a 10-15% stake in the company, but the exact value is still subject to the valuation study, Sarhan confirmed. The IPO will see the company’s main shareholder, the National Investment Bank, sell down its stake and will also involve a capital increase since no shareholders are presently looking to exit or sell down their stakes, Sarhan also said, confirming Ghazaly’s earlier statements to Enterprise.

What will e-Finance do with the proceeds? Some of the IPO’s proceeds will be deployed to expand in Africa to make use of Egypt's membership in the Common Market for Eastern and Southern Africa (Comesa), while some will be used to widen the company’s footprint in the local market, Sarhan said. The IPO will also accelerate the pace of capital increases to more than once every two years, and increase the company’s focus on internal governance.

As for BdC: Two months after our sit-down with Fayed, CBE governor Tarek Amer said that BdC could offer a 30-40% stake, up from the previously anticipated 20-30% stake. The original stake was expected to see the bank raise between USD 300-400 mn.

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